There comes a time when you have to acknowledge your own mortality and stare it in the face. That is the moment when you buy life insurance. But jokes aside, life insurance is important for everyone to have, because you should always be prepared in case something happens.
Especially if you’re the breadwinner of the family, you may feel like it is your responsibility to make sure that they are protected and taken care of in the eventuality of your untimely demise. So, what should you look out for when buying life insurance for the first time?
When shopping for such an important – and expensive – service, you need to clarify any misunderstanding you may have. Ask questions about the type of coverage, beneficiaries, the conditions in which they receive the money, type of payments and anything else you want to know.
You will notice something called Duty of Disclosure, which means you need to be honest with your insurer about the risks in your lifestyle, the state of your health, hereditary illness, etc. If you lie or fail to disclose something, your beneficiary may face repercussions in the future, including the inability to claim the insurance.
Make sure you have the right kind of coverage
As you may already know, there are different types of coverage for different needs. The most well-known kind of life insurance coverage is the lump sum paid to the beneficiary in the case of the insured person’s death. This sum can amount to about $1.5 million. However, there are other options, such as funeral cost coverage, which helps the family with the financial aspects of the funeral, and terminal illness coverage, which can kick in in the case of a life-threatening illness with a life expectancy of less than a year.
Look for premium reductions
Did you know that you are entitled to some reductions? Of course, they come under certain conditions, generally related to lower risk. For example, the younger you are, the lower your premium will be because you are less likely to suffer from life-threatening illnesses. Your lifestyle is also a concern, so if you regularly engage in risky behaviour, you may want to make a change.
Choose between level premiums and stepped premiums
Not all premiums are created equal, and you have to choose the one that makes more sense for you and your lifestyle. While level premiums do not change over the course of your life, they are higher to begin with. Depending on your financial situation, especially if you are young and/or just out of university, that may be a problem.
A stepped premium increases over time, but it starts out at a lower rate. That can benefit someone who isn’t in a great financial situation in the present, but it relies on an understanding that their income will increase in the coming years. Keep in mind that while this may be true, there is also retirement to consider.